What is a CIBIL score you may wonder, but the score is an essential aspect of availing credit. The score is calculated based on your past credit history and shows the lender how likely would you be to repay the credit that you avail. Scores over 650 or 700 are considered to be good scores at which you can easily get loans or credit cards. However, scores below this level are considered to be bad. If you have a bad score availing credit would become a problem. So, what can you do?
A bad score can be improved if you know how. Here are the ways which would help you improve a low CIBIL score –
• Clear your existing dues
If you are in a debt trap, your credit score would never improve. So, clear away all your existing dues. If your credit card bills are pending, pay them off. If you have availed a loan and you are defaulting on the repayments, clear off all outstanding instalments. Then you can have a clean slate and start working on improving your score.
• Start repaying your debts on time
One of the most fundamental reasons why your credit score is low might be the fact that you did not repay your debts on time. After you have cleared away the outstanding payments, start repaying the indebtedness as and when they fall due. Improve your repayment history by paying off the debt on time. Whether it is your credit card bills, loan, or both pay them off within the due date and see your score improve over time.
• Limit your credit utilisation
Credit utilisation means the credit that you utilise against the credit limit, which is available to you. If your utilisation is close to the limit allowed, it is considered high and your credit utilisation ratio increases. This hampers your credit score. So, always avoid utilising most of your credit limit. Limit your utilisation to up to 30% or 40% of the allowed credit limit, which would improve your credit utilisation ratio and, consequently, your CIBIL score.
• Build a credit history
Another reason why you might have a bad credit score is because of a limited credit history. A limited history is seen as bad as your credit utilisation cannot be judged. So, try and build upon your credit history for a better score. You can start by availing credit cards and making timely payments on their bills. Availing credit cards would not only build a credit history; timely bill payments would also improve your score.
• Check your credit report
There might be inaccuracies in your report which would be hampering your credit score. So, you should check your credit report regularly. Checking your report would help you find out whether you have a bad score and the reason for the bad score so that you can try and build it up. Moreover, any inaccuracies can be checked and appealed against so that your credit score is correctly calculated.
You can use all the ways mentioned above to try and improve your CIBIL score. Though it might take some time, these steps would help you increase your score so that you can easily avail credit in the future.